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Case 2:07-cv-00003-KS-MTP Document 30 Filed 11/30/2007 Page 1 of 8
This matter is before the Court on the defendant’s Motion to Set Aside Default
Judgment [#16]. The Court having reviewed the motion, the response, the briefs of
counsel for the parties, the pleadings and exhibits on file, the authorities cited and being
otherwise fully advised in the premises, finds that the motion is well taken and should
FACTUAL BACKGROUND
The plaintiff filed his original Complaint on January 4, 2007, for personal injuries
System on January 31, 2007, making the defendant’s Answer due February 20, 2007,
pursuant to Rule 12, Federal Rules of Civil Procedure. When the defendant failed to
timely respond, the plaintiff filed a Motion for Default on February 27, 2007. A Clerk’s
Entry of Default was entered on March 5, 2007, and on March 12, 2007, the plaintiff
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Case 2:07-cv-00003-KS-MTP Document 30 Filed 11/30/2007 Page 2 of 8
filed a Motion for Default Judgment and a Motion for Determination of Damages.
The court entered a Default Judgment against the defendant on March 16, 2007.
On March 28, the court conducted a hearing on damages and entered an order on
damages on April 6, 2007. On April 10, 2007, the court entered a final judgment in the
amount of $629, 444.35 against the defendant. The plaintiff forwarded the judgment to
the defendant on July 3, 2007, and it was received on July 5. The next day, on July 6,
the defendant filed an Emergency Motion for Stay of Judgment [#15]. On July 13, the
The Default Judgment which was entered on April 10, 2007, is a Final Judgment
as between the plaintiff and the defendant. The defendant had thirty days from that
date to attack this judgment by filing a Notice of Appeal. Fed.R.App.P., Rule 4(a). This
was not done. The question that now confronts this court is whether or not this Default
The defendant has moved to set aside the Default Judgment under Rule 55(c)
pursuant to the procedure set forth in Rule 60(b), Fed.R.Civ.P. The provisions of Rule
On motion and upon terms as are just, the court may relieve a party or a
party' s legal representative from a final judgment, order, or proceeding for
the following reasons: (1) mistake, inadvertence, surprise, or excusable
neglect; . . . (3) fraud (whether heretofore denominated intrinsic or
extrinsic), misrepresentation, or other misconduct of an adverse party; . . .
(5) the judgment has been satisfied, released, or discharged, or a prior
judgment upon which it is based has been reversed or otherwise vacated,
or it is no longer equitable that the judgment should have prospective
application; or (6) any other reason justifying relief from the operation of
the judgment.
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The decision whether to set aside a default judgment rests within the discretion
of this court, and review thereof is subject to an abuse of that discretion. Rogers v. ITT
Hartford Life & Accident Co., 167 F. 3d 933 (5th Cir. 1999). However, the Fifth Circuit
has “adopted a policy in favor of resolving cases on their merits and against the use of
default judgments. See Lindsey v. Prive Corp., 161 F.3d 886, 892-93 (5th Cir.1998);
Sun Bank of Ocala v. Pelican Homestead & Sav. Ass'n, 874 F.2d 274, 276 (5th
Cir.1989)(‘Default judgments are a drastic remedy, not favored by the Federal Rules
The Fifth Circuit has set forth three factors for the court to consider in
determining whether sufficient grounds exist for setting aside a default judgment under
Rule 60(b): (1) the extent of prejudice to the plaintiff; (2) the merits of the defendant’s
asserted defense; and (3) the culpability of the defendant’s conduct.” Id. at 938.
However, “[t]hese factors are not ‘talismanic.’ See CJC Holdings, Inc. v. Wright & Lato,
Inc., 979 F.2d 60, 64 (5th Cir.1992). A district court may consider other factors . . ..” Id.
at 939. However, if the court finds a willful failure to respond, the inquiry ends and the
Corporation System (“CT”), with the Summons and Complaint in this case on January
31, 2007. The defendant also admits that on February 1, 2007, it received via FedEx
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the Summons and Complaint issued in this case from CT. Sailorman admits that on
February 5, 2007, an employee, Ms. Kong, faxed that civil process to Christina Roldan
at Gallagher Bassett Services, the third party administrator for Sailorman who was
responsible for coordinating liability claims on behalf of Sailorman with its insurer and its
lawyers. After faxing the Summons and Complaint to the attention of Christina
Roldan, Ms. Kong states that an electronic fax machine report was generated at
Sailorman which showed the fax “was successful.” In truth, this report simply stated
When the Summons and Complaint were sent to the fax number at Gallagher
Basset, it was converted to an email directed to Rick Love. Love was a claims
supervisor with Gallagher Basset whose email account was deactivated when he left
the employ of Gallagher Basset in January of 2007, prior to the sending of the process
in this case.
However, the fax sent by Kong was actually sent to an intermediary, EasyLink,
for conversion from fax to email. EasyLink was under contract to Gallagher Basset to
provide this conversion service. Gallagher Basset had in place a system which rejected
all emails sent to deactivated accounts and sends a notice to the sender that the email
account, EasyLink was supposed to print out a copy of the fax and mail or forward it to
the local Gallagher Basset office where the invalid user account had been located. This
was not done and the defendant had no control system in place to track the litigation or
to otherwise confirm that Gallagher Basset had received the process and was handling
the case properly. Nothing further was done by the defendant until it received notice of
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The Fifth Circuit requires that parties have in place at least minimal internal
procedural safeguards to ensure that suit papers are forwarded successfully to the
entity responsible for handling them. See Baez v. S.S. Kresge Co., 518 F.2d 349, 350
(5th Cir.1975). Failure to provide such minimal safeguards makes the defendant'
s
neglect at least a partial cause of its failure to respond to the suit and places the burden
on the defendant to convince the court that its neglect was excusable. See id. See
also, Rogers, 167 F3d at 939. Once a defendant receives process, it has an obligation
to see that the process gets to the proper destination and to ensure that action is being
taken to defend or otherwise handle the matter. See id. The defendant failed to do that
in this case.
injury litigation and have no system in place to track the litigation. The defendant has
placed its emphasis on explaining to the court how the fax of the suit papers from the
defendant to its third party administrator, Gallagher Basset, was lost in transmission.
That is well and good. The failure of EasyLink and Gallagher Basset to execute on
each’s duty to timely transmit and receive documents is a logistical problem certain to
no employee of Sailorman followed up on the litigation for over five months until final
judgment was entered. The court thus concludes that the defendant was certainly
culpable in the failure to respond to the plaintiff’s Complaint. This is not a finding of
willfulness, which would have ended the inquiry. See Dierschkey, supra. Instead, the
court finds that the defendant’s neglect at lest partially caused the failure to respond.
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Thus, the court must view other factors to determine if the defendant’s conduct was
excusable. This requires the court to consider the extent of prejudice to the plaintiff and
Prejudice to the plaintiff must be real and not illusory and must be plainly
demonstrated to the court in order to defeat a motion to set aside a default. Further,
“[t]here is no prejudice to the plaintiff where ‘the setting aside of the default has done no
harm to plaintiff except to require it to prove its case. It has decided nothing against it
except that it cannot continue to hold the sweeping [relief] it obtained ... without a trial
and by default. All that ... has [been] done is to give the defendants their day in court.’
Gen. Tel. Corp. v. Gen. Tel. Answering Serv., 277 F.2d 919, 921 (5th Cir.1960). See
also United States v. One Parcel of Real Property, 763 F.2d 181, 183 (5th Cir.1985).”
Lacy v. Sitel, Corp., 227 f.3d 290, 293 (5th Cir. 2000). Further, “mere delay does not
alone constitute prejudice. Rather, ‘the plaintiff must show that the delay will result in
possible loss of evidence by virtue of the fact that the plaintiff’s treating physician, Dr.
Keith Melancon, has undergone brain surgery for a tumor and might not be available for
any future trial. While such a loss of evidence would be very prejudicial to the plaintiff,
to the point of causing a denial of the motion to set aside the default, the court finds that
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the plaintiff has failed to offer proof sufficient to show that Dr. Melancon would, more
likely than not, be unavailable. The plaintiff has made no other sufficient showing of
prejudice, nor does any potential for unfair prejudice appear in the record presently
The facts giving rise to the underlying cause of action are hotly disputed.
Summarized, it appears that the plaintiff was on the defendant’s premises for a birthday
party when he and his girlfriend Erica Matthews, an employee of the defendant, were
allegedly been sexually harassing Matthews and there was a confrontation between the
plaintiff and Crockett in the store. The fight subsided when the defendant’s manager
intervened. The parties proceeded outside the store where Crockett retrieved a
The precise details of who did what and when are, as the court said, hotly
contested. Each party has presented numerous affidavits and statements from
witnesses present on the date of the incident as well as police logs of 911 calls and
police reports. Apparently, Crockett has been charged with aggravated assault as a
result of this incident and is awaiting trial. Further, the plaintiff contends that the
defendant has taken statements and prepared affidavits of some of the witnesses that
differ materially from statements given by those same witnesses shortly after the
incident. The plaintiff also points out that he has offered evidentiary proof of the
incident before this court in the hearing to determine damages which was accepted by
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the court. In contrast, the defendant asserts that the evidence presented to the court in
defense. However, without a full trial on the issues before an appropriate trier of fact,
the court is left to determine diametrically different versions of the facts. This is not the
appropriate forum for such a resolution and supports the Fifth Circuit’s numerous
admonitions to the trial courts that disputes are best resolved on their merits and not
summarily.
Therefore, after considering the equities of the situation, enlightened by the facts
presented and the law, the court concludes that the default judgment entered by this
court, culminating in the Final Judgment of April 10, 2007, should be set aside and this
Aside Default Judgment [#16] is Granted; that this case is placed back on the court’s
active docket for resolution; that the defendant’s Emergency Motion for Stay of
Judgment [#15] is denied as moot; and that the parties shall contact the Magistrate
Judge withing ten days of the this order for the entry of a new Case Management
Order.
________________________________
s/Keith Starrett
UNITED STATES DISTRICT JUDGE
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